New Jersey Law on Payment of Commissions After Termination: What Employers and Employees Need to Know
By Andrew Zeitz, Esq.
New Jersey law provides robust protections for employees who earn commissions, ensuring that employers cannot withhold these earnings—regardless of whether an employee is terminated for cause, not for cause, or resigns voluntarily. Recent court decisions and statutory developments have clarified and strengthened these rights, making it essential for both employers and employees to understand their obligations and entitlements.
Commissions Are “Wages” Under New Jersey Law
The New Jersey Supreme Court, in Musker v. Suuchi, Inc. (2025), held unequivocally that commissions are considered “wages” under the New Jersey Wage Payment Law (NJWPL), N.J.S.A. 34:11-4.1 to -4.15. This means that earned commissions must be treated with the same legal protections as regular salary or hourly pay. Employers cannot reclassify commissions as “supplementary incentives” or “bonuses” to avoid their wage payment obligations.
Timing and Obligation to Pay Commissions After Termination
Statutory Requirements
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NJWPL: Employers must pay all wages, including commissions, by the next regular payday following termination, whether the employee was fired, laid off, or resigned.
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Sales Representatives: Under N.J.S.A. 2A:61A-2, when a contract with a sales representative ends, all earned but unpaid commissions become due within 30 days of termination or within 30 days of when the commissions would have been due under the contract, whichever is later. This applies even if the transaction is completed after the employment relationship ends, as long as the order was placed before or on the last day of employment.
Case Law Highlights
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Termination for Cause (e.g., Theft): Even if an employee is terminated for cause, such as theft, the employer must pay commissions earned up to the date of termination. The courts have held that termination alone cannot be used to forfeit earned commissions, and any company policy to the contrary is void as against public policy.
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Termination Not for Cause: The obligation to pay earned commissions remains unchanged. Employees are entitled to all commissions earned up to the date of separation.
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Voluntary Resignation: Employees who resign are also entitled to commissions earned up to their last day. The right to commissions is not forfeited by voluntary resignation, and commissions should be calculated proportionately for the period worked1.
Exceptions and Contractual Limitations
While the general rule is that earned commissions must be paid, parties can agree (in clear, unambiguous contract language) to limit entitlement to commissions under certain conditions, such as requiring continued employment until payment is received. However, courts scrutinize such provisions closely, and ambiguous or forfeiture-based clauses are often struck down.
Enforcement and Penalties
Employers who fail to pay earned commissions face significant liability:
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Damages: Employees may recover up to three times the amount of unpaid commissions, plus attorneys’ fees and costs, if they prevail in litigation5.
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Statutory Penalties: Under the NJWPL, employers may be liable for penalties of up to 200% of the unpaid wage, in addition to attorneys’ fees3.
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Prompt Payment: Failure to pay within the statutory timeframe can result in additional penalties, including daily damages after the eighth day of nonpayment17.
Best Practices for Employers
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Written Commission Agreements: Clearly define how and when commissions are earned and paid in writing.
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Payroll Practices: Treat commissions as wages for all purposes, including payment timing, recordkeeping, and obligations upon termination.
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Human Resources Training: Ensure HR staff understand the legal requirements and treat commission payments with the same urgency as regular wages.
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Regular Audits: Periodically review payroll practices to identify and correct any unpaid or underpaid commissions.
Key Takeaways
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Commissions are wages: New Jersey law treats commissions as wages, protected by the NJWPL.
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Earned commissions must be paid: Whether an employee is terminated for cause, not for cause, or resigns, earned commissions cannot be forfeited and must be paid promptly.
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Contract terms matter: Employers may impose reasonable, clear conditions on when commissions are earned, but cannot use termination alone to deny payment.
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Penalties for noncompliance: Employers face stiff penalties for failing to pay commissions on time, including treble damages and attorneys’ fees.
Andrew Zeitz, Esq.
For more information or legal assistance regarding employment and commission disputes in New Jersey, contact our office. We are committed to providing clear guidance and effective representation for both employers and employees.
